Cookies are small files which are stored on your computer. They allow us to improve your browsing experience by remembering your preferences each time you visit and gather browsing information in order for us to review the content to provide the best browsing experience possible. If you wish to change your cookie settings then follow your browser guidelines, Internet Explorer, Google Chrome, Mozilla Firefox, and Apple Safari (Mac). If you continue to browse our website, we'll assume that you are happy to receive cookies.

Figures released today from The Insolvency Service show there were 25,551 (28,951 last quarter) individual insolvencies in the Q3 of 2018. Insolvencies are made up of Individual Voluntary Arrangements (IVAs), bankruptcies and Debt Relief Orders (DROs) for England and Wales.

The number of IVAs in Q3 2018 fell 18% compared with a record high in Q2 2018. Q2 was the largest quarterly number of IVAs since they were introduced in 1987.

An IVA is a legally binding agreement between a consumer and his or her creditors, usually store and credit cards, bank loans and overdrafts and is supervised by an insolvency practitioner. With an IVA you have more control over your assets and are less likely to lose your home, but it involves paying some of your debts usually over a period of five years and any remaining debts left in the IVA will be written off. Read more on Individual Voluntary Arrangement (IVA) Information / Advice

Increase in consumer bankruptcies

Although consumer bankruptcy numbers dropped by 2.6% on the quarter they are surprisingly up by 7.2% on the year.

Of these 3,266 bankruptcies were made on the application of the debtor, which was 3.5% higher than the previous quarter and 11.9% higher than the same quarter in 2017. On creditor led petitions there were 934, this is 0.7% lower than the previous quarter but 16.0% higher than the same quarter in 2017.

In 2015 there was a change in the minimum amount of debt a creditor must be owed before they can make someone bankrupt, this increased from £750 to £5,000 for petitions presented from 1 October 2015. This change has led to a general decrease in the number of creditor petition bankruptcies.

The impact of high petition fees and Debt Relief Orders (DROs) on bankruptcy numbers

Whilst some debt advisors believe the high cost to the consumer in England and Wales to go bankrupt is distorting the numbers another major factor was the introduction of Debt Relief Orders (DROs) in 2009, combined this is likely to have affected the numbers. Another point is the recent change in the amount the debtor must owe before a creditor can petition, this has now risen from £750 to £5,000. Read more consumer bankruptcy and how to apply on line

Note in the table below the numbers going bankrupt in 2009 compared to 2010 - 2018.

The cost to go bankrupt England v Scotland

In 2009 the cost to petition for bankruptcy in England was £495, this increased by 37% in 2010 and as from 21 July 2016, this has increased further to £680. Meanwhile in Scotland it is just £200.

Debt Relief Orders (DROs) increased for the fifth consecutive quarter

DROs increased by 0.7% on the quarter and by 11.3 % on the same quarter in 2017.

Debt Relief Orders were introduced in 2009 and are another form of insolvency for those who have unsecured debts below £20,000, not a house owner, assets below £1,000 and under £50 pcm in disposable income. Those who propose a DRO do not pay anything towards their debts other than the admin fee of £90 and if their circumstances do not change after one year from the commencement of the DRO they are debt free. Read more Debt Relief Orders (DROs).

Those consumers that qualify for a DRO would find this a more attractive scenario than the normal bankruptcy process. For the first time, in 2013, there were more DROs than bankruptcies.

What is the most common insolvency procedure for consumers?

2017 - Of the 99,219 people who became insolvent in 2017, 59.7% had IVAs, 25.1% had DROs and 15.2% had bankruptcy orders. In 2016 IVAs comprised 55% of all individual insolvencies, compared to 50% in 2015 and 53% in 2014.

For 2018 - To date we have had Q1, Q2 and Q3 stats which suggest the numbers proposing IVAs will increase slightly from 59.75 to 61%

What this means to the insolvency rate per population

In the 12 months ending Q3 2018, the rate of insolvency was 23.1 per 10,000 adults (1 in 434 adults)

Insolvency rate – the total number of bankruptcies, IVAs and DROs in the latest twelve month period, divided by the average estimated adult (18+) population of England and Wales.

The fall in bankruptcy numbers after the 2010 increase in fees

Note in the table below that in 2009 (the year before the increase in fees) the number of those going bankrupt was close to 75,000 and that the numbers for 2016, 2017 and 2018 average 15,000.

Year

Total

Bankruptcies

IVAs

DROs

2009

134,142

74,670

47,641

1,831

2010

135,089

59,194

50,716

25,179

2011

119,943

41,876

49,058

29,009

2012

109,640

31,787

46,674

31,179

2013

100,998

24,571

48,881

27,546*

2014

99,223

20,345

52,190

26,688

2015

80,404

15,845

40,384

24,175

2016

90,657

15,044

49,417

26,196

2017

99,219

15,105

59,220

24,895

2018**

80,847

12,369

48,016

20,462

* For the first time, in 2013, there were more DROs than bankruptcies. ** Figures for first, second and third quarter of 2018.